For global sustainable development, supplying reliable, clean and affordable energy to all is critical. Also to achieve the stringent carbon emission reduction target, the global energy transition is towards increasing the renewable share of total power generation. As renewable resources are intermittent, widely variable and nature dependent, a decentralized hybrid energy system may be the potential solution to address these issues. However, mismatch between energy demand and generation of such systems is a critical problem that needs to be addressed. Excess power generated than local instantaneous demand must be utilized in a sustainable way. Production of hydrogen can address the above issues as it has large capacity and long term power absorption capability. Currently it is considered as a valuable energy carrier. This work proposes to convert the excess electricity of a distributed system to a value added by-product, i.e., ‘green’ hydrogen. This study presented an integrated methodology to evaluate the overall sustainability, i.e., techno-economic and environmental performances of this combined electricity and hydrogen production system. These sustainability assessments do not converge to a single optimal solution. Therefore, a multi-criteria decision making approach is adopted to decide the acceptable sustainable solution. This integrated methodology concludes that the solar-wind-diesel-battery-electrolyser combination is the acceptable optimal solution. It meets the required load and produces hydrogen as a by-product at least cost with optimal environmental impact (cost of electricity-$ 0.252/kWh, cost of hydrogen-$ 2.59/kg, renewable share- 98.4%, payback period- 6.1 yrs, human health- 76476.7 DALY, ecosystem 54.17 species.yr and resource-61521013 USD 2013).